When it comes to economic growth spurred by a knowledge-based economy, there are few regions in the country performing better than Northwest Arkansas.

New research released Monday (June 10) by the Walton Family Foundation, the Bentonville-based philanthropic organization started by Walmart founders Sam and Helen Walton, ranks Northwest Arkansas as the second-best performing metro economy in the country among medium-sized metros (500,000-999,000 in population).

Overall, in the report’s analysis of 379 metropolitan statistical areas (MSAs) in the U.S., Northwest Arkansas — described as “a corporate, college and cultural center” by the report’s authors — is ranked No. 17.

Ross DeVol was the lead researcher and author of the report, called “Most Dynamic Metropolitans.” DeVol is a Walton Fellow, focusing on research and policies related to the economic strength of Northwest Arkansas and the American heartland.

Jonas Crews, a research associate with the Walton Family Foundation, assisted in the research, which was conducted over three months earlier this year.

DeVol said a key takeaway from the research is MSAs with knowledge-based economies perform better than those that have yet to make much-needed investments in technology, education, entrepreneurship and commercialization.

“The data show that a knowledge-based economy is key to unlocking economic potential in metropolitan areas across the United States,” DeVol said. “Cities making investments in a knowledge-based economy have performed better economically than those that have not.”

DeVol said technology sectors are under-represented, and MSAs in the heartland of the country are not placing enough emphasis on supporting entrepreneurs.

“Investors must be willing to support early-stage firms, and more universities need to embrace commercialization as a critical part of their mission and educational attainment, particularly in science, technology, engineering and mathematics [STEM] for economic progress in the Heartland and throughout the nation,” he said.

DeVol, who joined the Walton Family Foundation’s Walton Fellows Program in the fall of 2017, is a former chief research officer at the Milken Institute, an economic think tank in California where he spent 20 years.

He said the aim of the new research is to provide an objective measure of the economic vibrancy of communities where the majority of Americans work and live. MSAs, according to the research, account for 88.6% of jobs, 89.1% of wages and 90.0% of Gross Domestic Product (GDP).

The research, DeVol said, reveals common characteristics shared by the top-performing regions, as opposed to those that don’t perform well.

Researchers used the MSA definitions developed by the U.S. Office of Management and Budget (OMB), based upon the most recent U.S. Census of 2010. MSAs are defined as a region having a large population nucleus with an adjacent population bearing a strong degree of economic and social interaction, including such measures as commuting patterns. Metropolitan areas are groups of counties.

Each MSA is ranked and reviewed on performance-based metrics, such as job growth, income gains and the proportion of total jobs at young firms — a key measure of entrepreneurial performance, DeVol said.

“Looking at the percentage of young firms — young being five years or less — that represent total employment is a fairly new data set but I would consider it a key statistic,” DeVol said. “One of the really important findings in my mind was that top-performing [MSAs] all had a high share of total employment represented by young firms. It indicates an area with a higher startup rate of young business. And also an area with businesses that have scaled up and survived and are beginning to employ more people.”

Among the 54 medium-sized MSAs in the U.S., Northwest Arkansas ranks in the top five in several metrics, including per capita personal income (No. 2), short-term average annual pay growth (No. 2), medium-term GDP growth (No. 2), medium-term pay growth (No. 3) and short-term GDP growth (No. 5).

Among all 379 MSAs, Northwest Arkansas is No. 9 in per capita income when adjusted for the cost of living.

“That’s also a relatively new data set to use and that really Northwest Arkansas’ ranking,” DeVol said. “My idea going into the research was that Northwest Arkansas was 25th or so overall and maybe 5th or 6th among medium MSAs,” DeVol said. “I think the one stat that moved Northwest Arkansas up was per capita personal income adjusted for cost of living.”

DeVol said Northwest Arkansas’ economic growth did moderate in 2018, but, he added, it could not have continued at its rapid pace with unemployment down to 2.9%

Midland, Texas, Silicon Valley, Calif. (San Jose-Sunnyvale-Santa Clara) and Midland, Mich. are the top three overall MSAs, according to the research.

Other Arkansas MSAs analyzed resulted in an overall ranking of No. 148 for the Jonesboro metro (No. 96 among small MSAs), No. 244 for the Memphis Tenn.-Ark.-Miss. metro (No. 48 among large MSAs), No. 245 for the Hot Springs metro (No. 155 among small MSAs), No. 251 for the Little Rock-North Little Rock-Conway metro (No. 43 among medium MSAs), No. 352 for the Fort Smith metro (No. 246 among small MSAs) and No. 375 for the Pine Bluff metro (No. 268 among small MSAs).

HEARTLAND FORWARDThe Walton Family Foundation also announced Monday that DeVol will transition to a new organization later this year.

DeVol will be president and CEO of the organization, called Heartland Forward. It’s described as a “think and do tank” whose primary mission is to promote regional innovation and entrepreneurial ecosystems that foster job creation, wage gains and economic growth for the heartland of America.

Heartland Forward will pursue its mission through independent, data-driven research, action-oriented convenings, such as the Heartland Summit, and impactful policy recommendations based on research highlighting economic trends that are having a positive impact on areas of America’s heartland — the 20 states in the middle of the country.

DeVol said his research team of Crews and Shelly Wisecarver, communications and program manager, will be joining him at Heartland Forward. DeVol said he’ll also be recruiting additional staff to scale up the institute and focus more on the “do” element of the “think and do” tank, which is to apply research findings in terms of policy implementation assistance.

“That’s reaching out to mayors, governors, economic development agencies and other leaders and trying to encourage them to implement these best practices [from the research],” DeVol said.

As for the new research, DeVol said while the heartland has several MSAs among the top performers, most regions need to participate more fully in the knowledge-based economy.

“Technology sectors are underrepresented, too many economic development resources are devoted to smokestack chasing [heavy manufacturing recruitment] and too little emphasis is placed on supporting entrepreneurs,” DeVol said. “Financiers must become comfortable investing in early-stage firms in non-traditional sectors and more research universities need to embrace and pursue commercialization as a key component of their mission. The educational attainment and skills of residents must advance.

DeVol also said a “compelling narrative” about the advantages of the heartland — such as lower housing costs— needs to be developed and better communicated for retaining and recruiting talent.